The Pennsylvania Game Commission failed to make sure that energy companies paid what they owed in royalties from oil and gas production on state hunting lands, according to an audit released Thursday.
The commission relied on the drillers’ own data and didn’t confirm their royalty calculations were accurate or that they actually paid the money, state auditors found.
The game commission, which manages state-owned hunting lands, permits drillers to extract natural gas from the vast Marcellus Shale formation in exchange for royalties, which rose from $9.3 million in 2015 to $19.2 million in 2017. About 133,700 acres of game lands are under lease.
“Essentially, the commission is relying on gas and oil companies to say how much money they owe,” Auditor General Eugene DePasquale said in a statement. “I find the lack of fiscal controls to be particularly troubling at a time when oil and gas royalty revenues doubled.”
The commission acknowledged it failed to adequately track royalties, attributing the problem to a lack of staff but said it has improved its accounting practices.
DePasquale’s audit also faulted the agency for sitting on a huge and growing pile of cash — it totaled nearly $73 million in 2018 — and failing to take those reserves into account when developing an annual budget. Auditors said the commission should consider its “full financial position” when making a budget or considering an increase in hunting license fees.
The audit, which covered fiscal years 2014-2017, looked at the commission’s overall fiscal management and made a total of 40 recommendations.
The game commission said in a statement that it has either already implemented the auditor general’s recommendations or is in the process if doing so.
“To do our best for Pennsylvania’s wildlife and citizens, we must work as efficiently and effectively as possible,” said the commission’s executive director, Bryan Burhans. “Nearly all the recommendations offered by the auditor general’s office will further improve the game commission’s operations.”
In assessing how the game commission was managing its oil and gas windfall, state auditors looked at royalty payments from 18 of the 66 energy companies that extracted gas from state game lands.
Auditors found the commission did not charge interest on delinquent payments nor did agency staff force gas companies to submit annual production reports that “could have provided an extra layer of accountability,” DePasquale said.
The agency also let royalty checks sit around. In one case, agency staff waited 63 days to deposit a check.